Why globalisation may not reduce inequality in poor countries - See more at: http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-0#sthash.jkAt7WR5.dpuf

There is no question that as more and more countries experience globalization the economic gap between countries is closing. However, this is not necessarily the case within these developing nations. In fact, they are experiencing greater economic inequality, which is visible in their increasing Gini index numbers. The Gini index is a measurement of inequality that ranges from zero (total equality) to one (all the wealth in a nation is in the hands of one individual). Countries in sub- Saharan Africa and China experienced increased Gini index numbers over the past two decades while simultaneously becoming more equal with other countries in the global market. The main question this phenomenon poses is whether it is the fault of globalization; most economists say it is not.

Usually, as countries develop, their economic inequality falls due to comparative advantage. Because inequality is actually increasing in these poor nations, economists are reevaluating the situation. One explanation for this phenomenon, economists think, is outsourcing. Unlike popular belief, workers in countries such as Vietnam who work in subcontracting factories are actually among the top 20% of the nation. This is because outsourcing nations actually hire skilled workers instead of the stereotypical poor, uneducated worker. Furthermore, people in these positions are able to work and come in contact with managers and business executives, furthering their productivity. These are opportunities that local employees simply don’t get.

            Economists continue to develop theories as to why this phenomenon is occurring but one thing is for sure, globalization isn’t helping to improve economic inequality within developing nations

If Germany, France and Italy cannot find a way to refloat Europe’s economy, the euro may yet be doomed http://www.economist.com/news/leaders/21614137-if-germany-france-and-italy-cannot-find-way-refloat-europes-economy-euro-may-yet-be

 

That sinking feeling (again)Four years ago the Euro zone went through a massive banking and sovereign debt crisis. Three of its biggest economies are still dealing with its lingering effects. Germany is on the verge of a recession, France’s economy is in the state of stagnation and Italy is dealing with a GDP that is barely above the figures that it represented 15 years ago when it initially accepted the Single Currency (Euro). These three countries make up for the majority of the Euro-Zone GDP (two thirds). So the recent economic growth seen in places like Spain and the Netherlands cannot account for the overall decline.
A few months ago the Euro Zone leadership had expected them to be out of the previous turmoil with growth returning to normal. Countries effected most by the Euro Zone crisis were recovering after massive bailout and the implementation of measures to reduce budget deficits and ultimately increase market competitiveness. Even after such measures unemployment among the youth was still very high, however; it was going down in most countries.
For drastic change in terms of dealing with the effects of the Euro Crisis, public opinion needs to change and widespread acceptance of the implementation of tough reforms is required.
Another issue Europe has to deal with is massive austerity. An implementation of similar policies of quantitative easing are also as option that needs to be considered. Mr Draghi has hinted support for this.  He hinted this specifically at Germany’s chancellor Angela Merkel who is very much inclined towards sticking to the Euro Zone’s rules on fiscal discipline. Similarly the German Bundesbank is against the implementation of quantitative easing.
The situation as of right now in the Euro Zone is very delicate and needs a decisive push by its leaders. If certain drastic measures are not taken then growth will not take place and could lead to deflation. Lost growth is very difficult to recover from, a prime example would be Japan which had to deal with a decade of lost growth in the 1990’s.
If the adoption of the Euro currency continues to lead to stagnation, joblessness and deflation then ultimately people will be inclined to leave the Euro. Which considering the current economic situation in the Euro zone is very likely.

America's Lost Oomph

http://www.economist.com/news/leaders/21607809-countrys-potential-growth-rate-barely-half-what-it-was-two-decades-ago-heres-how-raise

In the article, "America's Lost Oomph," the author begins by introducing some potential growth rate determinants, such as the supply of workers and rises in productivity. In the mid-1990's, when America's potential growth rate was considered to be 3% or 3.5%, these factors were much stronger than they are now. In fact, the supply of workers has not grown and the level of productivity per worker has even fallen in the past year. The author then describes some of the detrimental effects that having a lower economic growth speed can have, such as a slower rise in living standards, lower tax revenue, and today's debts being more of a burden in our futures. He further states that this problem is one that is self-inflicted, with the depressed supply of workers being caused by some of the current immigration policies, a lack of job training to get disabled or unemployed American's back into the workforce, Obamacare making it easier to receive health coverage without being employed, and high taxes toward businesses. The solutions to these problems that the author proposes include lowering taxes for businesses, immigration, disability, and welfare reforms, and investments in infrastructure. The author believes that by implementing some of these solutions, America's growth rate will rise.

After reading this article, I did question some of the proposed solutions to the lackluster growth rate currently being experienced in the United States. I hope that in continuing my education in economics I can better understand some of the issues in economics today, and whether some of these proposed solutions actually hold water. The biggest issue that I took from reading this article was that the author strongly criticized the taxes that corporations pay, calling them "sky high". When many corporations are earning high profits (such as JP Morgan, which earned 18 billion in 2013, or Walmart, with 17 million in earnings), by what measure can these companies not afford the taxes they are paying? And what evidence is there to suggest that a reduction in taxes would lead to more hiring? Isn't there already enough room in those high profits to hire more workers or invest in more capital? I would be interested in seeing more statistics and data along with proposed solutions, particularly in this sort of polarizing article so that everyone can get behind solutions that could be beneficial.

When cheap is not so cheap

http://www.economist.com/news/business-and-finance/21614076-rethinking-low-cost-and-high-cost-manufacturing-locations-when-cheap-not-so-cheap

There are a number of factors to look at while deciding where the location of a new factory will. These factor include cost, raw materials, energy, transport, etc. Labor cost is an important factor in this decision. Not only costs, exchange rates fluctuate too. So yesterday’s low-cost location may turn out to be tomorrow’s money-pit.

In China, the wage rates of labors have increased significantly over the years which gained a lot of attention from the outside world. Firms have now been trying to find out what the next cheap Asian country will be to take a chunk of China's manufacturing job-growth. Average factory wages have more than quintupled, in nominal, renminbi-denominated terms since 2004. Productivity levels have also grown. However, China's currency has appreciated as well. There a couple of other countries that have been moving up and down the cost rankings. For example, America and Mexico are becoming increasingly affordable, Brazil less so. 

In the United States, the wage restraint and the newly cheap energy have attracted a lot of manufacturers. In addition, Mexican wages have grown less than 50% in dollar terms over a decade, leaving them 13% cheaper than China’s. Decrease in Mexico’s energy prices, added strength to the country's competitiveness.

There are a few other countries in Europe, Asia and South American that are now under pressure because they were previously considered ‘low-cost’ countries. They are mainly Brazil, Russia, Poland, and the Czech Republic. In addition to Poland’s strengthening currency, their productivity grew quickly over the years as well but wage rates have risen even faster.

Production costs matter a lot to the firms. If the costs in a ‘low-cost’ country is just a few points lower than some other emerging or already developing countries, firms might tend to go for the latter. This is true for China’s and Russia’s case where national situation, such as corruption is a major problem. As a result, countries like Poland and Czech Republic might gain an upper hand in the labor market.  All the same, in all these cases, what may have seemed cheap at first is now starting to look rather more expensive.

ISIS is Becoming Self-Sustaining

ISIS, an extremist Islamic state in the Middle East, seems like just another terrorist movement in the ever-changing landscape of the Middle East but it could prove itself a bigger and stronger threat than others like Hamas and the Taliban. What makes ISIS different is with the way it is managed, it is able to sustain itself. The "Islamic State" is constantly expanding, taking over the Iraqi cities of Mosul and Fallujah, much of the Middle East, and even regions of Northern and Sub-Saharan Africa. 

The group has averaged gaining "$2 million a day in captured petroleum" alone and unknown amounts of money from regional banks and even "protection payments" from other cities (Beschloss, 2014). This influx of money along with their growing membership (beginning at 10,000 but now estimated at around 30,000), ISIS appears to have become a long-term problem for NATO and the west as it can keep growing and gaining influence seemingly indefinitely. 

ISIS, with its organized leadership and smart economic strategies, is constantly growing and can sustain itself with the spoils of the cities it takes over. In my opinion, one of the most alarming facts noted by Beschloss is that it is estimated that ISIS has control of and trades 80,000 barrels of oil a day (with prices around $100/barrel USD) so they not only have the money to operate their movement but also have an increasing grip on oil in the Middle East. Oil is obviously a product in high demand around the world and the U.S. is an explicitly stated enemy of ISIS so this isn't the best news for western oil prices. Granted the U.S. does import more from Canada than from the Middle East but in overall numbers, the U.S. spent $380 billion of the $700 billion total spent last year on imported petroleum. My rudimentary prediction would say that oil prices are likely to increase as ISIS control of oil increases and it appears that "10 of the last 11 recessions were preceded by spikes in oil prices" (Fuel Freedom). ISIS is now both a problem of political and economic interest and something needs to be done by NATO to counter their forward charge.

ISIS Article

Oil Price Graph

Prive Sector job growth

With the August coming to a close, economists finally get to analyze the job market. In August the private sector was able to add 204,000 jobs to the economy. Making it the fifth month in a row that the private sector has added more jobs. Over the past five months the private sector has added one million more workers to the workforce. It’s also not just in one industry either. Jobs have been created across a lot on industries, large and small. It also should bring down unemployment to 6.1%. Not a big drop, but it does mean a lot more people have jobs now.

This data shows the economy is starting to recover and output of the economy should increase with this surge in labor over the past five months. Federal reserve chair Janet Yellen is a little worried because there is a lack of wage growth with the job increase. This could cause people to leave their jobs in the future causing unemployment to rise back up again. Overall it is good to see job growth and hopefully it continues into next month.

http://money.cnn.com/2014/09/04/news/economy/adp-jobs-204000-august/index.html?iid=SF_E_River

Japan's economy contracts After Sales Tax Increase

http://www.nytimes.com/2014/08/14/business/international/japan-s-economy-contracts-after-sales-tax-increase.html?module=Search&mabReward=relbias%3Ar%2C%7B%222%22%3A%22RI%3A18%22%7D&_r=0

During the Spring Japan has raised their Sales Tax, which ended up driving Japans economy into one of the biggest contradictions.  On April 1st, the areas that took the biggest hit from this increase on sales tax was household spending and Japan's economy.  The bank of Japan believes that Japan was on its way to moderate recovery and they will not have to expand stimulus.  Unfortunately, after the third quarter for Japan the growth was very small.  There for the Prime Minster of Japan might have to create a second sales tax by 8 to 10 percent on October 15th.  On the other had the economics minister has told the government that if the third quarter ends weak that they will have to prepare a supplemental budget even though it won't be enough to affect the economy positively.  The quarter before Japan's economy shrank by 1.7 percent.  On top of that, export fell by .04 percent.  There are a lot of analysis believe Japan will come back.

"Judge's Ruling May Encourage BP to Settle"
According to the Wall Street Journal, U.S. District Judge Carl Barbier found that BP took irresponsible drilling risks and did not recognize danger signs before the 2010 oil spill occurred. The court has ruled the act as ''gross negligence" as opposed to just "negligence", which means BP will owe a lot more money. BP is not planning on confessing to gross negligence though. According to BP's oil spill estimates, they would only owe $10.5 billion. On the other hand, according to the prosecutors oil estimates, BP will owe $18 billion. Because of this situation, BP is heavily considering settling to avoid the top range of possible fines and lingering uncertainty. They also have already paid $43 billion in cleanup, criminal civil settlements, and other costs related to the accident in 2010.

There is also another problem for BP while this whole situation is occurring. U.S. and European union sanctions have targeted a state owned Russian company called Rosneft. They are threatening Rosneft's ability to replace the reserve it pumps. The problem for BP is that it owns almost 20% of Rosneft. These sanctions that have been brought up can cut into BP's income from Rosneft and make it difficult for BP to team with Rosneft to develop new Russian resources.

This whole situation made me develop some questions. First, Should BP have settled in the beginning of the whole situation and take the uncertainty of what is going to happen away from investors? Secondly, how do you guys think the case will pan out? lastly, do you think BP's Rosneft situation will cause BP to lose income?
   

"Sorry, No Vacancies" Why African Firms Create So Few Jobs.

An article from the Economist discusses the fact and potential reasons why African firms, on average,  are 24% smaller than equivalent firms in other countries. One possible explanation that the article explores is the corrupt government and the societies resistance to change. Larger firms in Africa are contacted by the government more and spend 14% more time talking to government officials. This is due to the opinion that large firms are more profitable, and attract the attention from the government for bribes and taxes. By remaining small, the firm avoids the corrupt officials. The article also discusses higher labor costs and the much more practiced form of informal employment, where people are heavily involved in agriculture and the commodity trade.

While traditions and views of a developing country can be diffucult to change, I believe some succes can be found in the article's final opinion, the development of the agricultural sector. 65% of Africa's labor force is in agriculture, greatly diminishing the supply of labor. This is typical of less developed countries due to the lack of technologocal advancements the would benifit this industry. Instead of efficiently producing food, more laborers are required to make the same amount of food. Agricultural advancements in Africa would increase the efficiency of farms, increase the labor force, and in turn the overall size of most firms.

Source:
http://www.economist.com/news/finance-and-economics/21599837-why-african-firms-create-so-few-jobs-sorry-no-vacancies

"Winging It"

  The article I reviewed is about Drone technology that is currently in the prototype and testing stage by Google. For those who don't have a full understanding of this product the Drone is already being used for military purposes by the U.S. government so as to reduce the loss of human life, drones are unmanned flying machines that come in all shapes and sizes. The prototype Google is working with is dubbed the "Google X" and is a single-wing machine with four propellers. This is not the first arrival of commercial drone however; last year Amazon opened this discussion with the revelation that they have been testing small drones for the delivery of packages to their customers. 

  It will be at least 5-10 years before these drones would be able to clear all of the hurdles in its path for full commercial use however. Google has the responsibility of proving that this product is not only efficient but safe for air travel in the United States, also Google has to overcome what is expected to be many legal hurdles and air travel regulations. On top of that Google has to illustrate that the privacy of the purchaser will not be violated by these drones being intercepted or having technological issues with delivering the packages to the proper address. 

  Also to be noted with the "Google X" is the benefits these drones would provide may even outweigh any negative repercussions caused by widespread commercial use. The Drones would ease traffic in terms of less road traffic for delivering commercial packages and they may prove to be more environmentally-friendly than the typical road transportation. Google also envisions these drones being capable of delivering supplies to disaster ridden areas with ease and less congestion than the normal methods used which has been a recurring issue for the U.S. government.

  One question that I can raise is how Google would avoid these packages being intercepted on a regular basis, I envision scenarios where many people have packages taken from the drop location at their homes or even taken out of the sky. Also, one question that I pose for those reading is whether or not you think the government should spend more time/money investing in widespread drone use for postal services or the before mentioned use in times of disaster. 

Below is the link to the article from The Economist;

http://www.economist.com/news/business-and-finance/21614424-google-announces-its-own-delivery-drones-project-winging-it

The $2.4 Million-Per-Day Company: Supercell

http://www.forbes.com/sites/karstenstrauss/2013/04/18/the-2-4-million-per-day-company-supercell/

"Uber Continues to Operate in Germany, Despite Court Ruling"

The ride-sharing service, Uber and other similar services have been embraced positively by many across the world.  For those unfamiliar with Uber; it is a smartphone app where customers use the GPS in their phones to hail cars nearby. Payment is processed through credit card information programmed into the application.
A number of taxi companies as well as worried officials have issued complaints about the safety and licensing requirements of Uber's drivers.  The reality of these complaints can be summed up to Taxi companies being angered over Uber's popularity and success while cutting into the Taxi's revenues.

A number of court proceedings have been filed in many cities. The New Orleans City Council just gave Uber the ok to operate but many still feel it is dangerous. Germany has outright banned the company in the entire Nation but Uber continues to operate. Those against these types of services feel that many drivers for these services lack the requirements and licenses to be performing such duties.

There are a number of questions surrounding this situation. Should governments (local, state, and national) be involved in deciding whether or not these services should operate? Do the Taxi's have a valid argument or are they more concerned uber-like services pose a real threat of competition?

Source(s):
http://www.wdsu.com/news/local-news/new-orleans/council-gives-ok-for-uber-to-operate-in-new-orleans/27888042#!bPYCIL

http://bits.blogs.nytimes.com/2014/09/03/uber-continues-to-operate-in-germany-despite-court-ruling/?ref=international

Fed's Fisher sees hints of price pressures despite soft July data

http://www.reuters.com/article/2014/09/05/us-usa-fed-fisher-idUSKBN0H000L20140905?feedType=RSS&feedName=GCA-Economy2010

Reuters discusses Fisher's views on the "cooling" inflation rates. However, his views, which "[strip] out the most volatile price movements, showed fast increases in July in some the index's largest, least volatile components." While this does provide a more insightful overall look, allowing us to better see where in the economy inflation is increasing or decreasing, "the jury is out" on whether or not it will be enough; volatile goods are still a large portion of the economy. A continued decreased inflation rate, especially if the Fed plans to raise it's interest rates, could prove problematic.

Another thing to note is that, even if inflation were to continue at the same rate, wages are currently being kept flat for many businesses (http://econlog.econlib.org/archives/2014/09/yellen_is_a_goo.html and associated sources). Because of this, the current cooling of the economy could lead to the flattened wages remaining as such for longer. For businesses that rely on these heavily volatile goods (for example airlines), this could mean  wage cuts that aren't implicit or even more layoffs.

"Builders race to develop sky-high condo buildings"

"It's happening all over. I describe this as luxury estate becoming the new global currency", said real estate appraiser Jonathan Miller.

As the world's economy is sky-rocketing, the demand for super tall skyscrapers also increases rapidly. Because the available space keeps reducing, new condo buildings keep getting taller and skinnier than ever.

The major part of the demand comes from international buyers, businessmen, and billionaires that are looking to invest.

Even though technology advancements allow architects to go higher without affecting the physical health of the residents, there are certain problems that developers have to face. First the costs of making these high skyscrapers are twice that of shorter buildings. Also, city lots are extremely expensive, and there are tons of regulations and community opposition.

http://money.cnn.com/2014/09/04/real_estate/builders-develop-sky-high-luxury-condo-buildings/index.html?iid=Lead

Job Corps is Giving Underprivileged Youths Hope For Work

Source

50 years ago, a program named Job Corps was initiated, and since then it has become one of the largest job training program sin the country. It specifically targets youths who are either underprivileged, are low-income, old foster children or those who the education system couldn’t help. The labor secretary of the program, Thomas Perez, was interviewed to answer questions about the program, and it became clear how helpful this program is. 

There are over 125 centers for Job Corps nationally, and for some people involved in the program, they live there. The program runs very rigorous training for skills that are needed for jobs, but also the vital skills that are needed in life, since the majority of those in the program have had tough lives. The students are trained in mechanical and computer skills, and any other skills that can help them thrive in today’s economy.

The success rate for Job Corps has been very high, where at least 80% of the graduates find themselves employed, in the military or pursuing a higher education.  In such a competitive economy like the one we have today, this program can change a lot of lives for the better.

Hundreds of Fast-Food Workers Striking for Higher Wages Are Arrested

  Today, fast-food workers in about 150 cities nationwide organized a sit-in civil disobedience to protest their current minimum wage pay, about $7.50 an hour. Their demands were for their wage to be raised to a minimum of $15 an hour. Workers in these low pay, fast food jobs find it hard to make ends meet and support a family on a pay of $7.50 and hour. This one day sit-in is now the seventh one-day strike protested by fast food workers. After fast-food strikes began in 2012, pressure on fast-food chains to raise the minimum wage floor to $15 an hour has been increased. The fast-food workers were joined, in their organized civil disobedience, by many health care workers and janitors who also have hopes of their minimum wage being raised to $15.

  Though the strike has received support for many non-fast food workers, there are also many who are critical of the strike. Rob Green, the executive director of the National Council of Chain Restaurants, was quoted saying that the civil disobedience is not only irresponsible, but disturbing and illegal for the works to to choreograph the sit-ins, calling it trespassing. The company of McDonald's stated this morning, that they, "support paying our valued employees fair wages aligned with a competitive marketplace...We believe that any minimum-wage increase should be implemented over time so that the impact on owners of small and medium-sized businesses — like the ones who own and operate the majority of our restaurants — is manageable.”

Such a factual and logical statement to be made in this situation. It is important for workers to know and understand the reasoning behind their level of pay. $7.50 an hour is what the economy has worked out to be fair for the skills required by these jobs. If wages were to double over night, like what the workers are demanding, the businesses would have to greatly increase their  menu prices, creating frustration among their consumers, who, in turn would cut back on their consumption of the more expensive products. This decrease in sales creates a decline in profits. If the minimum wage floor were to be raised, a decline in profits would mean that employers have to decrease their labor force by double to be able to keep up with payroll, which then increases unemployment. 

Link: http://www.nytimes.com/2014/09/05/business/economy/fast-food-workers-seeking-higher-wages-are-arrested-during-sit-ins.html?_r=0

"European Policy Makers Should Study Their Peers"

           "European policy makers should study their peers," says The Economist because in recent years America and Britain have handled the economic crisis much better than Japan and Eurozone. America and Britain have taken two very crucial measures to stabilize their economies; they have deployed unconventional stimuli such as quantitative easing (QE), and used "forward guidance" to ensure markets they will not raise interest rates too quickly. Such stimuli have warded off deflation despite tight fiscal policies, and kept inflation at a reasonable 2%.

            Although the European central bank (ECB) reacted well to the global financial crisis initially, it has slacked off as of recently. Its main mistake has been underestimating the threat of deflation. Instead of introducing methods such as QE, the ECB has raised interest rates to fend off non-existant inflation threats. This mistake has caused inflation to drop to a low of 0.4%, far below Eurozone's target of 2%. Unfortunately, this low inflation has caused businesses, households, and governments to slash spending in order to fend off debt burdens. 

         However, there are reasons as to why the Eurozone has had troubles recovering from the financial crisis. Unlike its peers , the ECB lacks political support for QE, and Germany's influential Bundes Bank is quite against it. Similarly, many of the Eurozone's problems such as excessive regulation, burdensome taxes, and rigid labor markets aren't even results of monetary policy.

         So what does this all mean? Well in a nutshell, the Eurozone needs to be bold and take action just as its peers have successfully done. However, the ECB is very concerned with inflation rising and that is why no drastic moves have been pursued. If the ECB were to use Japan as a model it could possibly make a positive impact. However, this would require more support, political support, and rhetorical commitment in order to jolt the country and its mentality out of deflation.  

From "Be Bold, Mario," an article in the August 23rd edition of The Economist 

Atlantic City's Big Bet on Gambling Sours

Since 1975, Casinos have been the main source of attraction in Atlantic City, New Jersey. During the 1980’s through 1990’s, this casino haven surpassed the Vegas strip casinos in gambling revenue. Despite this early success, as of this week, all but a few casinos in Atlantic City have shut down. The remaining three casinos that are open today are expected to foreclose within the upcoming weeks.  The reason behind the closings involves basic supply and demand laws. The casino market is one that is international, ultimately supplying too many casinos for its demand to catch up. Las Vegas, alongside Atlantic City, are considered two hotbeds for casino gambling. At one point, people across the globe traveled to these hot spots to enjoy the market for what it is. Now, we see high end casinos more local to consumers in states such as Pennsylvania, Maryland, and New York. Gambling analysts say that there is simply not enough people gambling today to satisfy all these casinos. Moreover, Atlantic City feeds off of the casino’s property tax revenue, accounting for 65% of the city’s budget. With these three casinos shutting down, it roughly amounts to a $30 million loss in property tax revenue. Not only is tax revenue down but unemployment numbers are skyrocketing with 6,000 employees now jobless.

Atlantis City’s mayor, Don Guardian, announced that he will now have to eliminate additional city employees to offset the lost tax revenue. In addition, Mayor Guardian plans to also raise property tax by 29% for homeowners. Atlantic City is now in shambles while the unemployment rate is 13%, more than double that of the U.S. national average. Governor Chris Christie initiated a five-year plan to boost the economic distress of Atlantic City. He plans to develop a convention center that will enable people to fly into the city’s small airport. This money will be used to hold events such as wine tastings, beach concerts, and aerospace shows. Moreover, the governor plans to incorporate a Bass Pro Shop, hunting and outdoor-goods store. With all these projects on the table, the question rises of whether or not this will overcome the harsh losses of gambling revenue. 

Link : http://online.wsj.com/articles/atlantic-citys-big-bet-on-gambling-sours-1409329414

The Economic Price of Colleges’ Failures

Source: http://www.nytimes.com/2014/09/03/upshot/the-economic-price-of-colleges-failures.html?ref=economy&_r=0&abt=0002&abg=0

This article discusses a study of individuals who have received a four-year higher education. In the study, a sample of first-year students attending four-year universities was given a test on skills that all colleges promise to teach to all students of all majors called the Collegiate Learning Assessment (CLA). At the end of senior year, these students took the same test again. Results of the study showed that most students improved “less than half of one standard deviation”. However, many of these students still received good grades in their classes due to the low expectations set by universities. Students whose professors had higher academic expectations and who spent more time studying learned more, scoring higher on the test than others.

While the skills measured by this test are certainly not the only ones learned by college students, a follow-up study found that these skills make a significant difference in finding and keeping a job post-graduation. The students in the study were less likely to be unemployed than young adults without a college degree, but many of the college graduates who scored low on the CLA were working in positions that they are overqualified for. On the other hand, students with higher scores on the CLA were less likely to be unemployed and more successful in the workplace overall. The author sums up the study’s results, stating “Because [low CLA-graduates] didn’t acquire vital critical thinking skills, they’re less likely to get a job and more likely to lose the jobs they get than students who received a good education”.

While a college degree will likely open more doors post-graduation, the article asserts that most employers can tell those who learned useful skills in college from those who did not. Taking into account the rising cost of higher education, this study makes clear the long-term value in receiving a high-quality college education over a mediocre one.